Profitability improved significantly due to lower fuel costs and a sharp increase in profits from the Singapore business. In 2023, the company achieved operating income of 254.397 billion yuan (+3.11%) and net profit of 8.446 billion yuan (+214.33%) to mother. The reason for the company's performance to turn a loss into a profit in 2023 was a year-on-year decrease in fuel costs and a year-on-year increase in electricity volume for domestic business units, as well as a sharp year-on-year increase in the company's profit in Singapore. In 2023, the company's average coal purchase price decreased by 115.78 yuan/ton year on year, and the unit fuel cost was 326.43 yuan/megawatt hour (-12.38%); in 2023, the company's Singapore business achieved pre-tax profit of 4.355 billion yuan (+131.90%).
The stabilization of electricity prices and the decline in coal prices have driven further improvements in thermal power profits, and the promotion of electricity reform has promoted the stability of thermal power profits. In 2024, the share of non-fossil energy will continue to increase. The growth rate of coal consumption is expected to slow down. Under policy guarantees, the quality of medium- and long-term contract execution for electricity and coal is expected to improve. The coal price center will decline. At the same time, electricity prices will stabilize, and the company's thermal power profits can be expected to improve further. In terms of electricity reform policies, the National Development and Reform Commission issued the “Notice on Establishing a Coal-Electricity Capacity Electricity Price System” policy, which adjusts the current single electricity price for coal-fired electricity to two electricity systems. Fixed costs for coal-fired power generation companies can be guided through capacity electricity prices; as construction of new power systems progresses, thermal power is gradually transformed from main power sources to flexible support power sources, and revenue from auxiliary services and capacity electricity prices has increased, and thermal power profits are expected to stabilize.
The share of new energy installations continues to increase, and future project operation will drive the company's performance growth. In 2023, the company added 10.00GW of infrastructure-connected controllable power generation capacity, including 2.03GW for wind power and 6.83 GW for photovoltaics, adding a total of 8.86GW. The company's “14th Five-Year Plan” new energy development plan is gradually being implemented. In 2024, the company will continue to invest in large-scale construction of new energy projects, and new energy installed capacity will continue to increase, driving steady growth in the company's performance. In terms of electricity prices, electricity prices are expected to decline in the future due to the increase in the proportion of electricity transactions and time-sharing policy adjustments. The promotion of green electricity trading and carbon trading will help hedge against the impact of falling electricity prices.
Risk warning: Industry policies fall short of expectations; electricity consumption falls; coal prices rise; electricity prices fall.
Investment advice: Lower profit forecasts due to lower electricity prices. The company's net profit for 2024-2026 is estimated to be 12.98 billion yuan, 143.1, and 15.55 billion yuan, respectively (the original 2024 and 2025 forecasts were 141.3 billion yuan and 16.29 billion yuan), EPS was 0.83, 0.91, and 0.99 yuan, and the corresponding PE was 11.0, 10.0, and 9.2 times, respectively. In 2024, new energy sources are expected to contribute 8.03 billion yuan, and thermal power and other contributions are estimated at 4.95 billion yuan. Given 12-13 times PE valuation for New Energy, 11-12 times PE valuation for Thermal Power and others, the company's reasonable market value is 1504-163.4 billion yuan, corresponding to a reasonable value of 9.61-10.44 yuan per share. There is room for a 6% to 15% premium compared to the current stock price, maintaining a “buy” rating.